I can't speak to multi-person lag - I've never played with someoen in the same room.
I can identify with your frustrations with mobs popping up all around you after a handful of seconds (or 30..or a minute..).
I conintue to have that problem myself, no matter where I go or how slow I walk. Its not my system, it is the engine and the game.
And Dhalin, for the record, I even rarely ever have lag in Dalaran - nothing even approaching what I have in Istaria.
I will say its not for the towns, its only for mobs and sometimes trees/countryside when I'm flying.
But its *always* there for mobs. I was in a deadlands just the other day and sat around for at least a minute or two before seeing any mobs.
It is very frustrating to me as well, and one of the reasons I rarely go out and hunt anymore. I had forgotten how frustrating I got until I went to do the new content, taking 20 minutes to kill 10 mobs is...annoying :/